FDI in India's Insurance Sector

FDI in the Insurance Sector has been a controversial topic, and has been debated upon for more than 10 years. The Insurance Regulatory and Development Authority (IRDA) Act, 1999 capped FDI in Insurance Companies at 26%. In April 2015, the Reserve Bank of India (RBI) issued a press note to notify the increase in the FDI limit, to 49%, with provisos. The guidelines specify that FDI up to 26% comes under automatic route and that between 26% and 49% requires government approval. These guidelines have brought into the ambit of 'Insurance', 'Other Insurance Intermediaries appointed under the provisions of IRDA Act, 1999'. Consequently, global re-insurance companies such as Berkshire Hathaway Inc., Lloyd's of London, Swiss Re and Munich Re are likely to set up branches in India. The existing joint venture partners of Indian Insurance Companies are interested in increasing their stake and have signed definitive agreements. Up to $10 billion of new foreign investments are expected to pour in. This paper discusses the increase in FDI limit and the impact it could have on the Insurance Industry as a whole